The Grand Race for Techno-Security Leadership

August 31, 2022
mahnkencheung

In the perilous race between the United States and China for dominance of the global technological and security commons, the recent passage of the CHIPS and Science Act adds a powerful and much-needed instrument in the U.S. arsenal to revitalize its ageing techno-security system. But China is constantly upgrading and expanding its toolbox, often in a far grander and expansive manner, such as with the introduction of highly ambitious long-term science, technology, and innovation plans in the past year. The scale, pace, and cost in this ratcheting up of efforts by Washington and Beijing to fortify their techno-security establishments looks set to far eclipse what took place between the United States and Soviet Union in the late 20th century. This is because the gap between the United States and China in economic and human resources and technological capabilities is much narrower than between the United States and Soviet Union.

 

 

Nowhere are the battle lines more clearly drawn than in the techno-security sphere. Central to the Sino-American rivalry are two different models of industrial and technological innovation in defense: China’s state-led top-down approach and the U.S. market-driven bottom-up system. Which of them will ultimately prevail will depend on how capable, robust, and adept they are in meeting the challenge of rapid and disruptive change. There is the need for a net assessment of the two countries’ techno-security systems, including their ability to innovate and field military capabilities.

The U.S. and Chinese techno-security systems are designed, configured, and operated differently from each other. The U.S. techno-security system is anchored in a deeply held anti-statist ethos that emphasizes limited government and an expansive leading role for the private sector, even though the U.S. government has at times exerted a powerful influence in shaping the techno-security ecosystem. By contrast, although pro-market forces have played a vital role in China’s economic development, its techno-security system is overwhelmingly statist with the party-state dominating ownership, control, and management. Since the end of the 20th century, the Chinese party-state has thrown its weight behind a focused program of innovation aimed at blunting the ability of the United States to defend its interests in the Western Pacific, and at closing the gap between U.S. and Chinese defense technology more broadly. Indeed, according to the deputy assistant secretary of the Air Force for acquisition, China has been acquiring new weapons five times faster than United States. As a result, the United States now faces a series of increasingly unfavorable military balances in the Western Pacific and beyond. In order to regain momentum in the competition with China, the United States will need to unleash the power of its own unique approach to defense innovation by revitalizing public-private partnerships and deepening engagement with allies.

Since the 1990s, China has undertaken a concerted effort to transform itself from a struggling technological laggard to a leading global innovator. Defense innovation has been at the forefront of Beijing’s effort, and China has made impressive strides in pace, scale, and quality of output. At the outset of the reform drive in the mid-to-late 1990s, the Chinese defense science, technology, and innovation system was in a spiraling decline and could only produce outdated foreign-derived weapons. By the second half of the 2010s, select pockets of excellence within the defense innovation system began to turn out advanced armaments such as stealthy fighter aircraft and large-sized aircraft carriers and the strike planes that fly off their decks. Today there is concern that Beijing could steal a march on the West when it comes to cutting-edge fields of innovation, such as quantum and artificial intelligence.

Threat Perception, Challenges, and Innovation

China’s governing elite has been focused upon competing with the United States for several decades. Deepening concerns about the external security environment since the late 1990s, and especially the threat posed by the United States, have motivated Chinese efforts to innovate. Beijing has used the perception of threats posed by Washington as a catalyst to both deploy weapons and ramp up techno-security capabilities more broadly. Such perceptions have only grown more dire and expansive under Xi Jinping and serve to both motivate and focus the development of Chinese industrial and technological innovation in defense.

By contrast, the United States has only recently begun to focus on the challenge posed by China. As China ramped up its efforts at innovation and military modernization from the beginning of the 2000s, U.S. assessments of these efforts were that they posed little strategic threat as Chinese capabilities were far behind U.S. levels. Indeed, while Beijing was focused on Washington, the United States was preoccupied by the Global War on Terror and threats emanating from the Middle East after the Sept. 11, 2001, terrorist attacks.

Although both the Bush and Obama administrations expressed concern about the growth of Chinese military power, it was not until the Trump administration that documents such as the National Security Strategy and National Defense Strategy spoke openly about the challenge posed by China and made great power competition the foremost priority. The Biden administration views China as “our most consequential strategic competitor and the pacing challenge” in its defense planning. Although today there is general consensus on the need to counter its aim to become a high-technology superpower, action has lagged rhetoric.

China’s State-Led, Top-Down Approach to Innovation

Centralized top-down coordination has been instrumental to many if not most of China’s signature strategic technological achievements, from nuclear weapons and ballistic missiles to the manned space program and high-performance computers. This top-down approach has been governed by a central planning system that relies on directly enforced administrative controls from state and party agencies and the use of penalties to ensure compliance by enterprises, research institutes, and other actors. Although there has been some relaxation and rollback of this pervasive state control in the post-1978 reform era, state planning, management, and intervention remain extensive because the techno-security ecosystem continues to be overwhelmingly under state ownership.

The Chinese authorities have sought to spur innovation by placing strategic bets on a hybrid approach to innovation and by seeking to promote domestic innovation. First, in the second half of the 2010s, China began to lay the foundations of a robust and expansive military-civil fusion framework. Beijing seems to hope that it will be able to tap civilian sources of innovation as extensively as the United States within the next decade or so. Although the approach has yet to make a significant impact on Chinese innovation, and the structural barriers to realizing this goal are high, Xi’s active leadership of the military-civil fusion initiative means the prospects for success are good.

Second, in another long-term big bet, Beijing is increasingly focused on self-reliance and broadening from foreign absorption of technology to emphasizing original, indigenous innovation. That having been said, a key and intentionally designed limitation of this model is that it can only manage a select number of high priority strategic and defense-related projects. Gaining access to and leveraging foreign technology and knowledge will continue to be an essential feature for the foreseeable future. Techno-nationalist dependence is a well-proven low-risk, high-reward development strategy and provides a safeguard, whereas the forging of an original innovation capacity is a long-term high-risk endeavor.

The U.S. Market-Driven, Bottom-Up Approach to Innovation

Whereas China has adopted a state-led, top-down approach to defense innovation, traditionally the United States has succeeded under a market-driven, bottom-up approach. The relationship between the state and market flourished during the Cold War, and this was a leading factor contributing to the success of the U.S. techno-security system over its counterpart in the Soviet Union. However, in the post-Cold War era, and especially in the 21st century, the traditional strengths of the U.S. techno-security system have not aged well. Three factors in particular are worth considering.

First, the mutually rewarding partnership between the public and private sectors has historically been an important driver of U.S. performance. The public-private relationship has, however, become strained in the 21st century. All too often, the views of those in the defense industry have been greeted with suspicion, and an adversarial narrative between government and industry has grown more prominent in recent years. This threatens to turn this pillar of strength into a source of weakness. Whereas Beijing aspires to military-civil fusion, the U.S. government often holds the defense industry at arm’s length. Whereas there has been much talk in recent years about the need to embrace innovation, such talk has often not been matched by action. The fact that complaints that the Defense Innovation Unit, which was founded to speed new technology to the field, took shortcuts in hiring and contracting were sufficient to derail the candidacy of the unit’s director to serve as undersecretary of defense for acquisition and sustainment illustrate the government’s schizophrenia on the topic.

Two trends in particular have contributed to the erosion of public-private partnerships in the United States. First, the defense acquisition system has become increasingly rigid and risk averse. It gives corporations few incentives to take the sort of risks that are crucial to innovation. The system also discourages firms from quickly fixing problems with known or promising solutions. The system is so expansive and complex as to defy reform. Moreover, the Defense Department is increasingly isolated from large portions of the most innovative and thriving commercial sectors of the economy. It should not be surprising that, according to former Under Secretary of Defense for Research and Engineering Mike Griffin, it takes the Defense Department 16 years to deliver an idea to operational capability, whereas it is claimed that China can sometimes do it in less than seven years — although a careful select analysis of Chinese programs shows that this is not the case.

Second, the U.S. techno-security system is struggling to have its voice heard in guiding innovation, as its once-dominant position as the biggest source of investment in research and development has eroded. The U.S. Department of Defense at the beginning of the 2020s accounts for a mere 3.6 percent of global research and development outlays, compared to 36 percent at its height in 1960.

Moreover, the Pentagon has gone from being a first adopter of technologies to being increasingly an investor in technology research. This means that many technologies originate in the civilian sphere and are subsequently — and often belatedly — adapted for defense and dual-use applications. While this is cost-efficient and allows access to a more extensive pool of innovation, the U.S. techno-security system risks becoming a follower rather than a leader unless it steps up to fill the gaps in defense-specific areas where the commercial sector is reluctant or unable to participate.

If these trends persist, the U.S. techno-security system could find its influence and place in the U.S. innovation system increasingly marginalized. This is already happening in the corporate sector. By the second half of the 2010s, the top five U.S. technology companies such as Google, Amazon, and Apple spent 10 times more annually on research and development than the top five U.S. defense prime contractors including Lockheed Martin, Boeing, and Raytheon. This growing imbalance in the public-private relationship could lead firms to decide that doing business with the techno-security system is not sufficiently lucrative and encourage them to focus instead on more profitable commercial markets domestically and internationally, including in China. Reinvigorating the public-private relationship will be critical in any effort by the United States to credibly compete against China over the long term.

Collaboration with Global Partners Is Increasingly Necessary

As the world’s most advanced techno-security power, the United States has been the dominant exporter of advanced technology, knowledge, and industrial products in both the military and civilian spheres. The possession of a comprehensive world-class science and technology base, especially in the defense technological arena, has meant that the United States has traditionally had little appetite to acquire foreign technology or know-how. This sense of industrial and technological superiority led to a fierce and enduring techno-nationalist ideology and posture in which the United States viewed itself as head and shoulders above the rest of the world.

But the global technological landscape has changed rapidly in the 21st century with the advent of a diverse array of emerging technologies, many of which have defense and dual-use applications. With its shrinking overall share of global research and development investment, the United States has found that it is increasingly difficult and costly to keep abreast of technological advances in all the key domains, which has made collaboration with foreign partners increasingly attractive and necessary. This cooperation is taking place in areas such as 5G, quantum computing, and communications — areas where China has been especially active and is vying for global leadership. But techno-nationalist primacy has been deeply entrenched within the institutional culture of the U.S. techno-security system for so long that a fundamental shift toward a more collaborative techno-globalist approach is likely to encounter entrenched resistance and will take time to effectively implement.

There have been occasional attempts to establish the foundations of a more globalist-oriented techno-security approach. The formation of the security compact known as ‘AUKUS’ (Australia, United Kingdom, and United States) in 2021 — centered on advanced defense and dual-use capabilities — is the most recent and promising opportunity for the rise of a U.S. globalist-oriented techno-security regime.

One area in which the United States has been able to pursue a more collaborative partnership with foreign allies is in controlling the spread of sensitive technologies. To respond to the technological challenges of the Soviet Union and Japan in the 20th century, the United States established a number of institutional frameworks to control the flow of technologies and know-how to these countries, especially the Coordinating Committee for Multilateral Export Controls. These regimes worked effectively in their own spheres, but the integrated civil-military challenge posed by China requires the U.S. government to develop a more robust and whole-of-government approach than the ad hoc and underdeveloped intra-agency process that currently exists.

The United States has been revamping these legacy regimes through incremental reforms such as the 2018 Foreign Investment Risk Review Modernization Act and a revamped export control regime. Nonetheless, there is still a gaping hole in the dual-use and strategic emerging high-technology domains that requires a new, wholly dedicated institutional mechanism that can respond more effectively and deal with this arena.

Conclusion

The U.S. techno-security system in the opening years of the 2020s remains much stronger and more innovative than its Chinese counterpart. This dominance is being steadily eroded, however, by U.S. institutional sclerosis, far-reaching global technological changes, and China’s intensive pace of techno-security development. Revitalizing key components of the U.S. techno-security system, especially public-private partnerships and engagement with global partners, will allow the United States to retain its global leadership edge over the long-term, although the gap with China will continue to shrink. The United States will need to undertake more transformative reforms to stay well ahead. Much will also depend on how serious the United States is about dealing with the long-term Chinese techno-security challenge to its national security and global leadership role given numerous competing domestic and international demands.

For China, the revamping of the techno-security state under Xi has seen the gap steadily close with the United States — but even more significant structural changes will be required to successfully transition from catching up to gaining parity or even leading. More effective coordination between the state and market mechanisms will be essential. Allowing hybridization — greater military-civil fusion — to be fully implemented will also be a vital step. The enhancement of the centralized top-down coordination model will be especially important in the race for the development of emerging core technologies as active early state intervention can play a more effective and decisive role than bottom-up market support. The Chinese techno-security state will need to address these key deficiencies if it is to mount a realistic challenge against the United States for long-term global techno-security leadership.

 

 

Tai Ming Cheung is director of the University of California Institute on Global Conflict and Cooperation and a professor at the School of Global Policy and Strategy at the University of California San Diego. Thomas G. Mahnken is president and CEO of the Center for Strategic and Budgetary Assessments and a senior research professor at the Johns Hopkins School of Advanced International Studies.

U.S. Navy photo by Mass Communication Specialist 1st Class Brandon Woods